Model Generosity – Leave a Lasting Legacy through Planned Giving
– Global Church of the Nazarene Foundation – Saturday, 4 January 2014
Jeremiah 29:11 says, "'For I know the plans I have for
you', declares the Lord, 'plans to prosper you and not to harm you, plans to
give you a hope and a future.'"
A prayer from Dr. Stan Toler and Steve Weber's The Little Book
of Offering Prayers and Verses:
"Lord, we give our gifts freely today as part of Your plan
for our lives. In return, You have promised to give us a 'hope and a future'
and that we may rest easy in Your care. Thank You for Your wonderful protection
as a loving Father. Help us to be faithful so that Your Kingdom will grow and
lives will be changed forever."
As we start the new year let us focus on God's faithfulness and
the hope and future we have in Him. If you have any questions on how you can be
a part of your favorite ministry's "hope and future" please contact
us by replying to this email or by calling our office at (913) 577- 2983.
Blessings,
Kenneth R. Roney, J.D.
President
PERSONAL PLANNER
Trusts for Surviving Spouse
There are three different basic types of trusts for a surviving
spouse: a qualified terminable interest property trust (QTIP), a qualified
domestic trust (QDOT) or a charitable remainder trust (CRT). All three of these
trusts may qualify for the marital deduction. However, there are many specific
reasons for choosing one of these three trust types.
QTIP Trust
The QTIP trust is the most common marital deduction trust. There
are four basic rules for the QTIP trust:
All income must be paid to the surviving spouse.
The surviving spouse may require the trustee to invest in assets
that produce income.
The principal may be invaded only for the benefit of the
surviving spouse.
The trust remainder will be distributed to the beneficiaries
designated under the will of the first to pass away.
A QTIP trust is excellent for protecting the children of a first
marriage. The trust can benefit the surviving spouse and then will be
transferred to those children.
Example—Jane Lost Everything But Betty Was Protected
Joe and Jane were married and had two children. On Saturday
evenings, they often went to dinner with their friends Bill and Betty.
Joe passed away first and had a simple will. He left his estate
outright to Jane. It qualified for the estate marital deduction so there was no
estate tax.
Subsequently, Jane married John Speculator. John was involved in
a Brazilian gold mining adventure. The entire estate of Jane was soon invested
far south of the border, never to return. Jane and her children lost
everything.
Bill and Betty decided to protect their estate. Bill created a
QTIP trust for his half of the estate. When Bill passed away, Betty was the
beneficiary of the QTIP trust. After a few years, she married Sam Speculator.
While Sam was involved in the Brazilian gold mining adventure, the QTIP created
by Bill provided income and protection for Betty for her lifetime. In addition,
the QTIP principal was protected.
QTIP Powers and Election
There are several powers that are permitted for a QTIP. First,
the required provisions are that the income be paid to the surviving spouse and
principal can be invaded only for the surviving spouse. However, the trustee
may choose to transfer the greater of 5% of trust assets or $5,000 each year to
the surviving spouse. In addition, it is permitted to allow the surviving
spouse to appoint the remainder. If the surviving spouse holds the power to
appoint, he or she can direct the trust to children from the first marriage,
but also could give trust assets to other persons.
A QTIP must be elected on the Form 706 Federal Estate Tax
Return. It is also possible to make a partial QTIP election and to create a
transfer of the balance that is taxable in the first estate. The benefit of
this plan is that this amount will be tax free to family in the second estate.
QDOT Trusts
If a spouse is not a U.S. citizen, then a transfer will not
qualify for the federal marital deduction. In this case it is possible to
create a qualified domestic trust (QDOT).
With a QDOT, the surviving spouse will receive all income. There
must be at least one trustee that is a U.S. citizen or corporation. If the
surviving spouse receives distributions of principal, those will be subject to
estate tax, with one exception. There is a "hardship" exception that
may allow tax-free principal distributions for emergency medical care or other
extraordinary circumstances.
If the surviving spouse desires to qualify for the regular
marital deduction, he or she may become a U.S. citizen prior to the date for
filing the federal Form 706 Estate Tax Return.
Charitable Remainder Trust (CRT)
The third option for a qualified marital deduction trust is a
charitable remainder trust. The trust may be created as a two-life agreement
during the joint lifetimes of the spouses or it could be created in a will or
living trust to benefit the surviving spouse.
There are two different payout options for this CRT. A standard
CRT pays 5% or more each year to the surviving spouse. This payout is made from
income and, if necessary, from trust principal. An attractive benefit of a CRT
is that it may grow tax free during the life of the surviving spouse.
Part of the CRT payments may be distributed at the lower capital
gain rates. Finally, because the assets are stepped up to fair market value in
the estate, the potential exists to invest in municipal bonds and pay out
tax-free income to the spouse.
A second payout method is a net-income-plus-makeup unitrust.
This trust method can enable the principal to be invested for growth rather
than income. Because the growth inside the trust is tax free, the surviving
spouse may dramatically lower income taxes if he or she does not need the
income. Rather than taking the full CRT payout and paying income tax, the
spouse permits the trustee to invest for growth for his or her lifetime. If
income is needed at a higher level later in life, the trustee may reinvest for
income and pay the regular income plus make up the prior shortfall.
With a CRT, after the surviving spouse passes away the remainder
is distributed to qualified exempt charities. The charities may be designated
by the first spouse to pass away, or a power can be given to the surviving
spouse to designate the charities.
-------
SAVVY LIVING
Stay in Touch with Age-Friendly Telephones
Can you recommend some good age-friendly home telephones? My
mother has a difficult time hearing over the phone and her vision and memory
are also impaired.
There are dozens of age-friendly phones on the market today that
can help with a variety of challenges such as hearing loss, impaired vision,
memory problems and limited mobility.
How to Choose
To select an appropriate age-friendly phone for your mom, take
into account her specific needs. There are many options and each phone helps
the user in a different way.
For individuals with hearing loss there are telephones that
provide various levels of amplification. The amplification usually ranges from
25 decibels (dB) to 55 dB. For those with high frequency hearing loss, many of
these telephones offer the ability to adjust the tone of the sound coming
through the receiver. In addition, most amplified phones include extra loud
ringers as well as bright ring flashers to indicate incoming calls and many are
hearing aid compatible. Most amplified phones also come with big buttons and a
lighted keypad that make them easier to see and operate for those with hand
tremors or dexterity problems.
For those with impaired vision, a phone that has a "talk
back" button is very useful. When the user presses the "talk
back" button, the phone speaks the number as the user dials and announces
the number of incoming calls.
If memory is a problem, consider a "photo phone" that
lets you insert pictures of family or friends over preprogrammed buttons. This
way, the user can simply press the picture of the person they want to reach and
the phone dials automatically.
"Emergency alert phones" are another option to
consider, especially for elderly seniors who live alone. These phones come with
a neck pendant or wristband (SOS button) that the user can wear. So, if they
fall down and can't get up, they can press the SOS button and the phone will
automatically dial the preprogrammed emergency numbers.
If mobility is an issue, there are "speaker phones"
that allow the user to activate the phone with their voice. Also, since
telemarketing fraud is so common among older individuals, many age-friendly
phones have built-in caller ID. This way, the user knows who is calling before
answering. Some phones even offer outgoing speech amplification for those with
weak speaking voices.
Where to Shop
While there are many companies that make and sell age-friendly
telephones, the leading suppliers in the industry are Clarity
(clarityproducts.com), ClearSounds (clearsounds.com), Serene Innovations
(sereneinnovations.com), Geemarc (geemarc.com) and VTech (vtechphones.com). To
find these and other models, visit their respective websites or try assistive
hearing sites like harriscomm.com, teltex.com and soundbytes.com. Prices
typically range from $30 to $300.
Free Phones
Also, forty-seven states have specialized telecommunications equipment
programs. If your state has a program, you may be able to get an amplified
telephone for free. Check with a local telephone company or visit tedpa.org to
find out what your state offers.
Captioned Phones
Finally, those with severe hearing loss should consider
captioned telephones. These phones have a built-in display window that allows
the user to listen to the caller as well as read written captions of everything
the caller is saying.
Available models include the CapTel (captel.com) sold by Weitbrecht
Communications, Inc. for $75 (or many states have programs that offer this
phone for free to residents in need), the popular new Clarity Ensemble that
sells for $75 through clarityproducts.com and the $75 CaptionCall available at
captioncall.com.
Savvy Living is written by Jim Miller, a regular contributor to
the NBC Today Show and author of "The Savvy Senior" book. The
articles are offered as a helpful and informative service to our friends and
may not always reflect this organization's official position on some topics.
Jim invites you to send your senior questions to: Savvy Senior, P.O. Box 5443,
Norman, OK 73070.
-------
YOUR PLAN
Deferred Gift Annuity
Several years ago Larry and Allison invested $30,000 in what
they believed to be an attractive stock. It turned out to be a very wise decision,
because the value of the stock increased to $100,000 a few years later. Though
they were not in need of additional income at the time, the couple decided to
cash in on this growth and began considering selling the stock.
Allison: We had had a good year and were looking for ways to
maximize deductions and reduce what we owed in taxes. At the same time, we had
been exploring the best way to make a gift to our favorite charity.
Larry: Allison and I were both age 50 at the time, in good
health and still working. And though we didn't really need extra current
income, we were planning to retire at age 65 so we were always interested in
smart retirement planning. Our goal was to be able to live comfortably and
travel in our motorhome to visit friends and family.
Allison: I remember when we met with a gift planner. He
explained the benefits of setting up a deferred gift annuity. Instead of
selling, we could give our stock to our favorite charity and receive an
immediate charitable tax deduction. Plus, when we turn 65, the deferred gift
annuity would make annual retirement income payments to us for our lifetime.
Larry: We decided to set up the deferred gift annuity. And we
experienced first hand each of the benefits Allison mentioned: we received a
charitable tax deduction and tax savings immediately. And now that we're
retired, we receive income each year that helps make our retirement travel
possible. On top of all of this, the deferred gift annuity makes a portion of
the income payments we receive tax free.
*Please note: The name and image above is representative of a
typical donor and may or may not be an actual donor to our organization. Since
your gift annuity benefits may be different, you may want to click here to view
a color example of your benefits.
-------
WASHINGTON NEWS
Washington Developments in 2014
What will happen in Washington this year? There are several
discussion topics that will be active during 2014. These include the ongoing
tax reform efforts, tax extenders and the November election.
1. Tax Reform – Senate Finance Committee Chair Max Baucus (D-MT)
published several tax reform discussion drafts in 2013. However, he did not
proceed to actually drafting a bill. House Ways and Means Committee Chair Dave
Camp (R-MI) and his staff were drafting a house bill in October of 2013.
However, after discussion with Speaker John Boehner, Chairman Camp decided to
hold up release of the actual bill. It is possible that Camp may release
additional discussion drafts in 2014.
2. Senate Finance Committee Chair – Sen. Baucus had indicated he
planned to retire at the end of 2014. However, President Obama appointed him as
Ambassador to China. Following the expected confirmation of Baucus by the
Senate, the probable next Chairman of the Senate Finance Committee will be Sen.
Ron Wyden (D-OR). Wyden has been very involved in the tax reform process for
many years, but there will be a natural period of time to restart the effort in
the Senate Finance Committee.
3. Tax Extenders – The 60+ tax extenders lapsed on December 31,
2013. The philanthropy community is particularly interested in the IRA
charitable rollover. It passed initially in 2006 and has been effective each
year since that time. Charitable organizations hope that there will be a bill
this summer to enact the tax extenders. In an election year, there are several
popular extenders such as the teachers' supplies deduction that encourage
Congress to act. However, it is possible that the tax extenders bill may be
held again until a lame duck session after the November election. If this
occurs, charities will face a very compressed marketing campaign for 2014 IRA
charitable rollovers. The favorable news is that the IRA rollover is on all of
the published lists of tax extenders and therefore is very likely to pass.
4. Election Positioning – Taxes generally do not elect
candidates. The discussion of lower rates in exchange for reduced itemized
deductions may cause major problems for candidates. The inclination of
taxpayers is to protect the existing benefit rather than exchange a deduction
for lower rates. For this reason, the forthcoming election makes major tax
reform more challenging in 2014.
Why 2014 Tax Reform is Difficult
Many Washington observers compare tax reform to the last
successful major revision in 1986. Since that date, there have been over a
dozen tax acts, but there has not been a single comprehensive reform of
personal and business taxes.
Tax reform sounds good in concept, but is always politically
difficult. There is a general agreement in both the House and the Senate among
the tax committee members that the economy would benefit from lower personal
and corporate tax rates. However, this necessarily requires limiting some
personal and business deductions. The natural inclination of interest groups is
to mobilize resources in a very powerful effort to protect each specific
deduction or tax credit.
In 1986 there was a confluence of favorable factors. The factors
included a strong economy, low unemployment and a general consensus among the
White House, House and Senate leaders in favor of reform. There was an
agreement to reform both personal and corporate taxes. The changes in the
corporate depreciation schedules and the investment tax credit plus the
increase in the capital gains tax provided the revenue that facilitated a large
reduction in personal tax rates.
Even with all of these favorable factors, the road to reform in
1986 was very rocky. Despite major efforts by President Ronald Reagan and House
Ways and Means Chair Dan Rostenkowski (D-IL), tax reform failed initially in
the House and in the Senate Finance Committee. It took a strong bipartisan
lobbying effort to move the bill through to passage.
The challenges in 2014 are readily evident. The U.S. economy is
in a slow recovery and there still is fairly high unemployment. There is a lack
of bipartisan agreement in the White House, Senate and House. A major
philosophical division is whether the tax bill should raise major new revenue
or be revenue neutral.
The loss of Senate Finance Committee Leader Max Baucus makes the
transition more difficult in the Senate. As Baucus moves to a new position as
Ambassador to China, incoming Chair Ron Wyden will face the challenges of the
November election.
Editor's Note: Nearly all of the leadership in Washington agrees
that tax reform is necessary. However, with the current political circumstances
an actual bill is some distance in the future. The process may start when
Chairman Camp decides to release an actual draft. While it is still a very long
way to passage of major tax reform, the draft may establish a base for lower
itemized deductions. For all supporters of philanthropy, it continues to be
important to emphasize the uniqueness of the charitable deduction and hope that
any initial draft published in 2014 will still protect that deduction.
Published January 3, 2014
-------
FINANCES
Stocks - More Milk Needed in General Mills' Bowl
General Mills, Inc. (GIS) announced its second quarter 2014
results on December 18, 2013. The company's results disappointed investors and
contributed to a negative outlook for the company's prospects going forward.
General Mills reported revenue of $4.88 billion for the quarter,
virtually unchanged from what was reported during the same period last year. No
movement in quarterly revenue disappointed investors who expected revenue to be
close to $4.93 billion.
The company reported earnings per share of $0.83 for the
quarter, which was lower than the $0.86 reported during the comparable quarter
last year. Once again, investors were disappointed as they hoped earnings per
share would be slightly higher at $0.89.
"The second quarter was a difficult comparison to strong
prior-year sales and earnings results for our business," said Ken Powell,
CEO of General Mills. "As we enter the second half of fiscal 2014, we
expect our earnings growth to accelerate from first-half levels."
General Mills, like its competitor Kellogg, has been
experiencing slower growth over the past couple years. Consumers are increasingly
turning to other products instead of the processed goods that General Mills
produces. During the comparable period last year, General Mills saw earnings
growth of 13.16% while this quarter its earnings growth declined. Naturally,
analysts and investors are concerned about the decline in growth and whether
the company can turn it around. For General Mills, the challenge is whether it
can add more milk to its financial bowl.
General Mills, Inc. (GIS) shares ended the week at $49.26.
CarMax Narrowly Misses Expectations
CarMax, Inc. (KMX), a used-car dealership, announced its third
quarter results on December 20, 2013. Although the company had a strong
third-quarter, it missed earnings estimates by a penny per share, a fact
investors did not like.
The company reported quarterly revenue of $2.94 billion. This
represents an increase of 13% over the $2.6 billion reported during the same
period last year. Analysts had expected revenue of $2.87 billion for the
quarter.
Earnings per share for the quarter increased nearly 15% to $0.47
per share from $0.41. This figure missed analysts' expectations by $0.01,
however.
With a significant jump in sales, investors were disappointed to
see CarMax's earnings per share miss expectations. Much of the blame appeared to
rest on the fact that CarMax had difficulty competing with third-party lenders
in the profitable auto-financing market.
In a statement, the company had this to say about the
difficulties it faced in the auto-financing market this past quarter.
"Given the relevance of subprime to our business and the overall market,
we believe it is prudent to gain further insight into underwriting and
servicing accounts within this credit profile."
The company's otherwise successful quarter and announcement that
it plans to address its new difficulties in the auto-finance market were not
enough to prevent significant damage to its stock price. As a result of the
earnings per share miss, CarMax's stock price fell 10%, a drop it has not yet
overcome.
CarMax, Inc. (KMX) shares ended the week at $46.44.
Winnebago Industries Reports Strong Earnings
Winnebago Industries, Inc. (WGO), a recreation vehicle
manufacturer, announced its first quarter results on December 19, 2013. The
company had an impressive quarter that unfortunately was unable to match the
lofty expectations investors had placed on the company.
The company reported revenue of $222.7 million, an increase of
15% over the $193.6 million reported during the same period last year. The
large revenue increase was unable to match lofty expectations that revenue
would be $233.1 million.
Winnebago's earnings per share for the quarter was $0.40, a
whopping 53.8% increase over the $0.26 reported during the comparable period
last year. This figure was $0.03 higher than analysts' estimates.
"Our strong first quarter results are a reflection of our
dedicated team running the business well," said Randy Potts, Winnebago
Industries' Chairman, CEO and President. "We plan to continue to bring new
and innovative products to market and believe we have tremendous growth
opportunities ahead. In addition to our new products, the backlog reflects a large
rental order to be delivered primarily in our third fiscal quarter, which is
incremental to our normal rental business."
Winnebago industries has delivered impressive results as of late
with this past quarter being its seventh consecutive quarter of double-digit
sales and profit growth. More impressively, Winnebago has seen sales and profit
growth during a tepid economic recovery. It is no surprise, then, that the
stock price has risen dramatically over the past year, a trend that looks to
continue.
Winnebago Industries, Inc. (WGO) shares ended the week at
$26.84.
The Dow started the week of 12/30 at 16,485 and closed at 16,470
on 1/3. The S&P 500 started the week at 1,841 and closed at 1,831. The
NASDAQ started the week at 4,154 and closed at 4,132.
-------
Bonds - Treasuries Little Changed To Start 2014
Treasury yields rose slightly on Friday January 3rd just before
departing Federal Reserve Chairman Ben Bernanke was to speak at an economics
conference in Philadelphia. Ben Bernanke's comments will come less than three
weeks after the Federal Reserve announced its intentions to begin reducing its
monthly bond purchases.
There was little change in bond yields this week. On January
2nd, the 10-year note reached its highest level since July 2011 when it reached
3.05%. Early on January 3rd, the 10-year note yield rose one basis point to 3%.
As bond yields rise, prices fall. The 30-year bond yield rose two basis points
to 3.94%, though it had reached 3.97% January 2nd, its highest level since
August 2011.
Dan Heckerman, Senior Fixed-Income Strategist at U.S. Bank Wealth
Management, doesn't see much change in bond yields without further economic
news. "The market is kind of settled in here in terms of a trading range
until we get some further confirmation that the economy is improving," he
said.
Investors will get some of this further economic news next week
as the U.S. Labor Department will report the jobs numbers for December.
Economists estimate that the report will show an increase of 195,000 jobs for
December versus 203,000 added in November.
Most economic signs of late have been positive. Third quarter
GDP grew 4.1% in the third quarter of 2013 and the most recent jobs report
showed the unemployment rate falling to 7.0%. As a result, the Federal Reserve
announced on December 18 plans to begin reducing its monthly bond purchases of
$85 billion by $10 billion per month. Time will tell how the economic recovery,
and thus the markets, will react to the Fed's decision.
The 10-year Treasury note yield finished the week of 12/30 at
3.0% while the 30-year Treasury note yield finished the week at 3.93%.
-------
CDs and Mortgages - Interest Rates Increase in the New Year
Freddie Mac released the results of its weekly Primary Mortgage
Market Survey on Thursday, January 2. The results show average fixed mortgage
rates moving higher at the start of 2014.
This week, the 15-year fixed rate mortgage averaged 3.55%. This
represents an increase from last week when it averaged 3.52%. One year ago, the
15-year fixed rate mortgage averaged 2.64%.
The 30-year fixed rate mortgage averaged 4.53% this week. This
represents an increase from last week when it averaged 4.48%. Last year at this
time, the 30-year fixed rate mortgage averaged 3.34%.
"Mortgage rates edged up to begin the year on signs of a
stronger economic recovery," said Frank Nothaft, Vice President and Chief
Economist at Freddie Mac. "The pending home sales index inched up 0.2% in
November, after five consecutive months of decline. The Conference Board
reported that confidence among consumers rose in December and the
S&P/Case-Shiller 20-city composite house price index rose 13.6% over the
12-months ending in October 2013."
The money market fund finished the week of 12/30 at 0.4%. The
1-year CD finished at 0.7%.
Published January 3, 2014
-------
Global Church of the Nazarene Foundation
17001 Prairie Star Parkway, Suite 200
Lenexa, KS 66220 United States
-------
No comments:
Post a Comment